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Prime Minister unveils new cabinet to tackle debt crisis

Prime Minister Pedro Passos Coelho (pictured left) unveiled a new, pared-down cabinet Saturday, including two economists, as the country struggles to tackle its debt crisis. The cabinet will begin work Tuesday immediately after parliament meets.

The 11-member cabinet includes four members of centre-right Social Democrat party (PSD), the winner of June 5 polls, three from junior coalition partner CDS-PP and four independents, the presidency announced.

The previous government had 16 ministers.

Socialist PM quits

AFP - Outgoing Portuguese Prime Minister Jose Socrates on Sunday quit the leadership of the Socialist Party after it lost an early general election to the centre-right Social Democrats.

"This defeat is mine and I feel it is necessary to open a new political cycle that is able to prepare a consistent alternative," he said in an address to party supporters in Lisbon.

"I want to give the Socialist Party the space to discuss its future and select a new leadership."

The new cabinet will begin work next Tuesday after parliament meets, Passos Coelho said following a meeting with President Anibal Cavaco Silva.

"I was appointed 48 hours ago, and since I have committed myself, I took initiatives very quickly so that the country would know in a record time the government which will lead the country for the next four years," he said.

The PSD agreed on a coalition with the CDS-PP after it failed to win a majority of seats.

The independent Gaspar was appointed finance minister. A trained economist, Gaspar has been a special adviser to Portugal's central bank since 2010.

Previously he led the European Commission's Bureau of Policy Advisers and worked before that as a research director at the European Central Bank for six years.

Another economist and independent lawmaker, Alvaro Santos Pereira, was given the economy and employment portfolio. CDS-PP leader Paulo Portas was appointed foreign minister and Social Democrat Jose Aguiar was named defence minister.

Final results released this week by the interior ministry showed the PSD had won 108 seats in the 230-strong chamber while the CDS-PP won 24 seats.

The 132 seats they command between them gives them a comfortable overall majority.

The Socialists won 74 seats, the Communist-Green CDU coalition 16, while the far-left Left Bloc picked up eight seats.

The three leading political parties have all broadly agreed to implement the loan conditions laid out by the EU and the IMF.

Portugal owed 160 billion euros at the end of 2010 and its deficit for the year was 9.1 percent of GDP, more than triple the rate allowed among EU members. Unemployment for 2010 stood at 11 percent.

Passos Coelho had previously agreed to go beyond the conditions set out by the EU and IMF, specifically favouring a more aggressive privatisation plan.